Tech

Microsoft unveils Windows Phone handsets

Dell, HTC, Samsung and LG build devices for new operating system

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SamMamudi

DanGallagher

JohnLetzing

NEW YORK (MarketWatch) — Microsoft Corp. lifted the wraps Monday off a line of handsets for its new Windows Phone 7 mobile-operating system, which the software giant hopes will revive its sagging business in the smart-phone market.

Features for the phones that Microsoft hopes will help the devices stand out in a competitive sector are Microsoft Office software, Xbox Live accounts and close integration with online services such as Facebook and Slacker. Read about Microsoft’s uphill battle in mobile.

Several device manufacturers from the PC and wireless industries, including Dell Inc.
DELL
Samsung, HTC and LG, will build handsets for the platform.

The first phone, the Samsung Focus, will launch on Nov 8. at AT&T Inc.
T, -0.07%
Speaking at the event, Ralph de la Vega, chief executive of AT&T mobility and consumer markets, said the carrier plans to offer phones from LG and HTC within weeks of the launch.

All three handsets will cost $200 each, and will be powered by the Snapdragon processor built by Qualcomm Inc.
QCOM, -0.04%

Ballmer said that Windows Phone 7 devices will be carried by 60 operators, including T-Mobile, Orange and Vodafone PLC
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in 30 countries. Nine handsets have been developed so far to run Windows Phone 7, he pointed out.

Windows Phone hubs

As part of what Microsoft and AT&T are billing as a new experience, Windows Phones will be organized into six hubs — people, pictures, office, music and video, games and apps — and each hub will be connected to cloud services.

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Microsoft unveiled a lineup of smart phones using its revamped Windows Phone 7 mobile-operating system, the software giant's boldest move to remain a player in the mobile business. Spencer Ante, Dan Gallagher and Jennifer Valentino-DeVries discuss.

For example, the pictures hub will not only display pictures taken by the phone, but also photographs downloaded from a synced PC and any albums from a user’s social-networking account, such as Facebook. Users can also upload photos taken by the phone to their Facebook account by simply tapping on the picture. In the people hub, contact information, including photographs and updates, can be directly downloaded from Facebook and similar services.

“[We’re] trying to connect to cloud services in a very interesting way,” said Joe Belfiore, corporate vice president at Microsoft, who led the design of Windows Phone 7.

Belfiore added that Windows Phone handsets will be the only devices to offer access to Microsoft’s Xbox Live games and digital network. Belfiore also announced at the event that videogame-making giant Electronic Arts Inc.
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will have a “suite of games” available on the devices, and proceeded to show game play on a phone from one of EA’s best-selling titles, “The Sims 3.”

Windows Phone’s social and gaming aspects seem to take aim at Apple Inc.’s
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iPhone and handsets built for the Android operating system developed by Google Inc.
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But Belfiore also showed off what the devices can do with Microsoft Office software, presenting features for the corporate market currently dominated by the BlackBerry line of products from Research In Motion Ltd.
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“The Office capabilities built in [to the phones] are unique and incredibly powerful,” he said.

Outlook, Microsoft’s email software, will be fully integrated with a user’s PC account, and the devices will also provide access to shared documents stored on cloud servers. The phones will run presentations on PowerPoint 2010, and users will also be able to edit and change slides using the software as well.

All the phones will feature three “hard” buttons at the bottom: a back button, an action button akin to the iPhone’s one “hard” button and a search button, which will launch Microsoft’s Bing search engine.

Among other features, users will have free online access to their phone, with a website that shows their device’s data and files.

An uphill battle

Microsoft faces an uphill battle as it tries to regain share in the mobile device market after its predecessor OS — Windows Mobile — diminished significantly in popularity after bruising competition from rivals.

As a result, the software giant has become a minor player in the market, with Windows accounting for less than 5% of the global smart-phone market by the end of August compared with 8.7% for the same period last year, according to data from Gartner Inc.

In that time, Android’s market share has soared from 3.9% to 17.7%, while Apple’s iOS has climbed from 14.4% to 15.4%.

“Do I think that this is a marked improvement over previous versions of the OS? Absolutely. Do I think that it will have a positive impact on sales this year and next year? Yes, I do,” Gartner analyst Carolina Milanesi wrote in a blog post on Monday. “Do I believe that Microsoft has done enough to establish itself as a key OS in five years’ time? I am not sure.”

Analysts covering Microsoft generally believe that the company’s mobile software generates a marginal amount of revenue, though it’s nonetheless a strategically important business.

Microsoft does not publicly disclose the amount of revenue it sees from its mobile business. However, analysts estimate that mobile software currently accounts for anywhere between $200 million and $1 billion of Microsoft’s annual sales — a small fraction of the firm’s $62.5 billion in sales for the fiscal year ended in June.

“It probably has not been a huge growth business for a few years,” said IDC analyst Al Hilwa. Microsoft’s “Windows Embedded” software, used to power devices such as vehicle-navigation systems and printers, is actually likely to have provided a bigger financial boost for the company than mobile-phone software recently, he indicated.

An opportunity

However, Windows Phone 7 now presents a significant growth opportunity for Microsoft, analysts say. It’s also an important means of helping to support the adoption of other Microsoft products by both consumers and businesses on mobile devices.

Directions on Microsoft analyst Matt Rosoff, who estimates that Microsoft’s mobile business now garners no more than $500 million per year in revenue, said a mobile offering is “important for Microsoft to help bolster its enterprise software.”

Rosoff estimated that Microsoft collects between $15 and $20 per mobile phone with every sale of a Windows Phone 7 license. Microsoft does not disclose the amount it receives per copy of Windows.

In Microsoft’s annual proxy filing earlier this month, the company disclosed the Chief Executive Steve Ballmer’s annual bonus was crimped by factors including the company’s loss of market share in the mobile-phone market.

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